Jackson v Southfield Neighborhood Revitalization Initiative, ___ Mich ___ (July 16, 2025, Docket No. 166320)
In Rafaeli, LLC v Oakland County, 505 Mich. 429 (July 17, 2020), the Michigan Supreme Court held that when a property has been offered for sale at a public auction, just compensation requires the foreclosing governmental unit (FGU) to return any proceeds from the tax-foreclosure sale in excess of the delinquent taxes, interest, penalties, and fees reasonably related to the foreclosure and sale of the property.
In a unanimous opinion the Michigan Supreme Court has now held that the same principles apply when, as in Jackson, there is no sale by public auction because a governmental unit exercises its right of first refusal under former MCL 211.78m(1). The governmental unit still commits a taking if the value of the property retained exceeds what the government was owed.
Because the properties in Jackson were purchased for the minimum bid in lieu of being made available to purchase through public auctions, to the extent the value of plaintiffs’ respective properties exceeded the amount plaintiffs owed in delinquent taxes and attendant fees, the Court held it was a taking without just compensation in violation of Michigan’s Takings Clause.
The Court noted that after Rafaeli was decided, the Legislature amended portions of the GPTA by passing 2020 PA 255 and 2020 PA 256:
“MCL 211.78m(1) now requires the governmental unit exercising its right of first refusal to acquire foreclosed property to pay the greater of the minimum bid or the fair market value of the property. … Retroactive application of the amended statute would impose a new financial obligation on a real-estate transaction that took place years earlier. Accordingly, amended MCL 211.78m applies only prospectively to claims accruing after 2020 PA 255 became effective, i.e., claims accruing on or after January 1, 2021.
“Under MCL 211.78t(12)(b), ‘remaining proceeds’ is defined as ‘the amount equal to the difference between the amount paid to the foreclosing governmental unit for a property due to the sale or transfer of the property under section 78m and the sum of’ (1) the minimum bid, (2) other fees and expenses incurred by the FGU not included in the minimum bid, and (3) a sale commission. …
“ ‘Remaining proceeds’ does not include the additional value associated with the real property that was acquired or retained by a governmental unit when the retained value was not reduced to a monetary amount through a sale.”
The Court concluded, “When a governmental unit has exercised its right of first refusal under former MCL 211.78m(1) and purchased the property from the FGU for the minimum bid, the process outlined in MCL 211.78t for recovering remaining proceeds does not govern a claimant’s dispute regarding the additional value associated with the real property that was acquired or retained by the governmental unit. Instead, such claimants should proceed through standard processes of inverse condemnation, separate from the statutory process of MCL 211.78t, to recover that additional value.”